Request By:
Mr. Marlow Burt
Executive Director
Kentucky Center for the Arts Corporation
3 Riverfront Plaza
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Thomas R. Emerson, Assistant Attorney General
This is in reply to your memorandum raising questions concerning the applicability of various statutes to the Kentucky Center for the Arts Corporation, which was created as the result of a legislative enactment of the 1980 session of the General Assembly (KRS 153.400 to 153.460).
You state that the Kentucky Center for the Arts Corporation is a management authority with full control over the Kentucky Center for the Arts. The Corporation is not a budget unit of the Commonwealth but will sublease the facility from the Department of Finance. The Center will be owned by the State Property and Buildings Commission which will finance the acquisition and construction by a bond issue. The Department of Finance will lease the facility from the State Property and Buildings Commission and will then sublease it to the Corporation. The 1980 budget includes $2,800,000 in the budget of the Department of Finance for debt service on the bond issue.
The Kentucky Center for the Arts Corporation is not a budget unit of the Commonwealth and receives operating revenues from external sources. The statute authorizes the fiscal court in counties containing first class cities to increase the hotel occupancy tax and turn over sums collected from the increase to the Corporation. A private nonprofit foundation has raised substantial sums which can be used for capital needs and operating expenses of the Corporation. Also, the Corporation will receive revenues from the sale of tickets, including a surcharge thereon.
Your questions concern the extent to which the Corporation is subject to state regulation and you refer to the hiring of staff, contracting for professional and other services, the procurement provisions of KRS Chapters 45 and 45A and the maintenance of bank accounts as provided in KRS Chapter 41.
It is your position that the Corporation is not subject to state regulation except in certain specific areas. You recognize that the Department of Finance will supervise the construction of the Center for the Arts and that any bond issue of the Corporation is subject to approval by that Department. You maintain that the Center for the Arts Corporation is an independent body, not dependent upon further state revenues to maintain its operation, but with independent budget sources. As a nonbudgeted private entity the Corporation desires to manage the Center for the Arts using its professional expertise, free from state regulation.
KRS 153.410 provides in part for the establishment of a Kentucky Center for the Arts Corporation consisting of eleven members appointed by the Governor. The Kentucky Center for the Arts Corporation shall be a body corporate with full corporate powers.
KRS 153.420 sets forth the powers and duties of the Corporation. In part, it shall supervise the construction of the Center for the Arts in conjunction with the Department of Finance and it shall provide all management functions for the facility and for any other property acquired or leased pursuant to its powers under this statute. The Corporation may issue revenue bonds subject to the procedures which shall be established by the Department of Finance; it may levy a surcharge on tickets for all functions held within the Center to contribute to operating revenue, and it may receive tax revenues from any governmental unit and financial contributions of local governments, private persons and foundations. It shall have exclusive control of all exhibitions, performances and concessions in the Center for the Arts. The Corporation's other powers and duties are set forth in KRS 153.420.
KRS 153.430 states that the Corporation shall appoint an executive director who shall be the chief administrative officer of the Corporation and he shall provide the staff direction and coordination in implementing the program and discharging the duties of the corporation. The executive director is authorized to act under the direction of the Corporation in employing necessary staff to perform its duties and exercise those powers granted by KRS 153.420. Note also that KRS 153.430(2) states that the staff shall keep all minutes, records and orders of the Corporation, and shall be responsible for preservation of all such documents, which are public records subject to KRS 61.870 to 61.884.
Before responding to your specific questions, it is necessary to place matters in their proper perspective by stating that the Corporation is not, as you imply, a private corporate entity almost totally independent from state control, but, rather, a public corporate entity and a subdivision of the state, enjoying a substantial degree of autonomy, with specific public purposes to accomplish within a defined list of powers and duties.
Your first question pertains to personnel for the Corporation and in connection with the hiring of staff, KRS 153.430 provides in part that the executive director is authorized to act under direction of the Corporation in employing necessary staff members Thus, the Corporation determines its personnel needs and hires accordingly, independent of state government and the Department of Personnel. The Department of Personnel advises that it maintains neither records nor procedures relative to personnel for the Kentucky Center for the Arts Corporation.
Your second question concerns contracting by the Corporation for professional and other services.
KRS 45.530 to 45.545, dealing with the Professional Employment Commission and a professional employment contract, have been repealed by the 1980 session of the General Assembly. KRS 45.700 to 45.720 deal with personal service contracts and the procedures to follow in connection with the approval of such contracts. In OAG 79-452, copy enclosed, at page five, we said that the Kentucky Housing Corporation is not included among the various "contracting bodies," defined in KRS 45.700(1)(a), that are required to submit personal service contracts to the Legislative Research Commission and the Personal Service Contract Review Subcommittee for approval.
Thus, the Kentucky Center for the Arts Corporation, a public corporate entity and a subdivision of the state, is not an agency or department or other administrative grouping of the Commonwealth of Kentucky subject to the provisions of KRS 45.700 to 45.720 relating to personal service contracts.
Your third question relates to procurement activities of the Corporation and the applicability of KRS Chapters 45 and 45A to those functions.
KRS Chapter 45A is known as the Kentucky Model Procurement Code. As stated in KRS 45A.020, the Code shall apply to every expenditure of public funds by this Commonwealth under any contract or like business agreement. The Corporation, however, is not a budget unit of the Commonwealth and receives operating revenues from external sources.
Therefore, in our opinion, the Kentucky Center for the Arts Corporation is not subject to the terms, provisions and requirements of the Model Procurement Code as it relates to procurement by the state. The Corporation does not an will not expend public funds of the Commonwealth.
Your fourth question involves the extent to which the Corporation is subject to KRS Chapter 41 and the maintenance of bank accounts.
Generally, KRS 41.070 provides that no receipts of state money or money for which the state is responsible shall be held, used or deposited in any personal or special bank account by any agent or employe of any budget unit, to meet expenditures or for any other purpose. All receipts of any character of any budget unit shall be paid promptly into the state treasury. The statute refers to budget units and the definition of a budget unit under KRS 41.010, 43.010 and 45.010 is a department or other unit of organization for which separate appropriations are made from those for any other organization unit.
If the Corporation is not a budget unit of the Commonwealth, then monies it receives do not have to be deposited in the state treasury. See OAG 72-494, copy enclosed.